Thank you for taking the time to join our earnings briefing today. At the outset, we would like to extend our sincere apologies for the inconvenience caused by the postponement of our first quarter earnings announcement, which had originally been scheduled for July 11, but was delayed just two days prior to the planned release. As already disclosed, the postponement of the earnings announcement was due to the identification of an underestimation of allowance for doubtful accounts at Post and Telecommunication Finance Company Limited, PTF, a Vietnam-based financial company. This issue was identified in relation to the period prior to its acquisition by AEON Financial Service as a consolidated subsidiary in February of this year. In working toward a resolution of this matter, both our company and AEON Financial Service have been engaged in discussions with Southeast Asia Commercial Joint Stock Bank, SeABank, the former owner of PTF.
Through these discussions, it was confirmed that SeABank had not been aware of the underestimation of allowance for doubtful accounts during their ownership of PTF. Both parties share a common goal of restoring stable operations at PTF and have continued constructive dialogue toward that end. As a result of these discussions, both companies reached an agreement to jointly support the normalization and growth of PTF's operations. In addition, PTF sold a portion of its trade receivables and made additional provisions for doubtful accounts retroactively for prior fiscal years. These steps have ensured that PTF is now able to conduct its operations in a stable manner. Furthermore, the recent acquisition of a wholly foreign-owned finance license enabled AEON Financial Service to formulate a new business plan aimed at expanding its operations in Vietnam.
Now that the financial impact on our consolidated results has been clarified, we have proceeded with today's earnings announcement, July 31, as previously disclosed. At 5:15 P.M. today, AEON Financial Service will hold its earnings announcement, during which they plan to present the background of the matter, the performance revision resulting from the reassessment of PTF's corporate value, and their new business plan for Vietnam. Looking ahead, we believe that expanding financial services in Vietnam, especially in collaboration with our retail operations, will not only support the growth of our group, but also contributes to enhancing the quality of life in this fast-growing market. Today, I will be presenting an overview of the first quarter financial results as well as the progress on our business structure reforms, including capital policies. Following my remarks, Mr. Egawa, Head of Finance and Business Management, will provide a detailed first-quarter performance report.
Let me start by giving you a quick overview of our first-quarter performance. As you can see, we delivered growth in both revenue and profit up to the ordinary income level, with operating profit hitting a record high for the period. As for net income attributable to owners of the parent, we reported a loss for the quarter. This was primarily due to a loss of approximately JPY 1.8 billion related to PTF, as mentioned earlier. The majority of this reflects a temporary tax loss associated with domestic restructuring efforts, such as those involving Tsuruha. These are one-off factors and do not reflect the underlying performance of our business. With the full acquisitions of AEON Mall and AEON Delight completed, and Tsuruha now accounted for under the equity method, we expect the effects of these restructuring measures to begin contributing to net income going forward.
According to a recent survey by Teikoku Databank, Ltd., manufacturers are expected to raise prices on more than 20,000 food items this year, the first time in two years that the number has exceeded this level. Prices continue to rise at a pace that exceeds wage growth. While per capita spending on consumer goods, especially food, appears relatively firm, this is primarily driven by inflation in essential goods, which has led to unavoidable increases in household expenses. As a result, we are seeing stronger tendencies to cut back on discretionary spending and tighten household budgets. Even in food-related spending, actual spending has declined in real terms, highlighting a growing sensitivity to prices and a stronger focus on saving among consumers.
In the retail business, intensifying price competition, along with rising operating costs such as labor and electricity, is forcing retailers to navigate both intensifying price competition and rising operating costs, such as labor and electricity. As a result, the profit structure has become increasingly strained. This challenging environment began to surface last year, and we do not expect any significant improvement in the current fiscal period. As a breakthrough measure, in the second half of last fiscal year, we clearly established a group policy focused on price competitiveness centered around our private brand, Best Price, aiming to secure gross profit. At the same time, we implemented cost structure reforms to improve productivity. As a result, we have seen a turnaround to higher revenue and profit since the second half of last year.
In the current fiscal period, these initiatives have been firmly embedded at the operational level, leading to continued improvement through both securing gross profit and controlling SG&A expenses. This has sustained a positive trend of revenue and profit growth. Regarding the top line, our private brand continues to grow, with TOPVALU sales achieving double-digit growth for three consecutive months. In particular, Best Price sales increased by 15% in the first quarter, while category brands for drugstores grew by 23%, reflecting strong customer support for products that align with their price sensitivity. On the cost side, even in the retail business where wage increases have had a significant impact, we are seeing meaningful improvements in hourly labor productivity. These improvements have been driven by the rollout of in-store digital transformation, the implementation of management tools, and the growing emphasis on person-hour management at the operational level.
As a result, per-hour productivity has increased by more than 5% across GMS, supermarkets, and discount stores. Looking back at the previous fiscal year, in the first quarter, a heavy cost structure directly impacted on our profitability. The decline in gross profit flowed through to the bottom line, resulting in a decline of JPY 8.1 billion in operating profit in the retail business compared to the same period the year before. This fiscal year, having established a more solid cost structure, we are now less susceptible to fluctuations in the top line. At the same time, we are beginning to see a more direct link between top-line growth and profitability. Operating profit in the retail business has rebounded by JPY 8.4 billion from the previous year, fully offsetting last year’s shortfall.
This marks a return to the same level as in fiscal year 2023, when the retail business led the group to a record high annual profit. Further details on performance by segment will be explained in the following section by Mr. Egawa. This fiscal year, with an eye toward the next medium-term management plan, we are undertaking more comprehensive and strategic structural reforms than ever before, focusing on transforming our business structure to one that is truly competitive. As previously announced, we have completed the full acquisition of AEON Delight and AEON Mall . The formation of the new drugstore alliance involving Tsuruha, Welcia, and AEON is also part of these initiatives. I will now provide an update on the progress of each of these efforts. With regard to AEON Delight , as a result of the tender offer conducted between March 3rd and April 24th, our ownership stake reached 86.4%.
Based on this, we held an extraordinary general meeting of shareholders on June 24th, where we approved a share consolidation. Full ownership was completed on July 22nd. We are currently working to aggregate demand across the group with the aim of optimizing both cost and quality. In parallel, we have begun coordinating with group companies to strengthen our group-wide BCP framework, with AEON Delight playing a central role in preparation for potential disasters. The demand aggregation initiative has the potential to generate between JPY 50 billion and JPY 60 billion in sales. As for AEON Mall, following approval at the shareholders' meeting, the company was successfully made a wholly owned subsidiary on July 1st, as originally planned. We are currently engaged in discussions aimed at generating synergies, including clarifying the strategic direction of existing assets and developing a framework for the redevelopment of current properties.
As previously disclosed, AEON mall delivered year-on-year increases in both revenue and profit in the first quarter, with all levels of earnings surpassing pre-COVID figures and setting a new record high. In Japan, strong performance was driven by the expansion and revitalization of existing malls, enhanced promotional activity through large-scale events, and sales to visitors to Japan increasing by 1.5 x compared to the previous year. Combined with effective cost control, the business continues to perform strongly. Overseas, the revitalization of existing malls and strengthened promotional efforts targeting seasonal consumer demand have driven specialty store sales growth in all countries where we operate, resulting in increased revenue and profit across our international operations. AEON mall ’s profitability has now surpassed pre-COVID levels, and its earnings base has stabilized.
This milestone is highly meaningful not only for AEON mall itself, marking a new chapter of growth as a wholly owned subsidiary, but also for the entire group. Regarding Tsuruha, clearance under the Anti-Monopoly Act was obtained from the Japan Fair Trade Commission on April 30th, and on May 26th, Tsuruha shareholders approved the integration with Welcia Holdings at their general meeting. As for the upcoming schedule, a share exchange is planned for December, through which Welcia will become a wholly owned subsidiary of Tsuruha. Following a public tender offer by our company, Tsuruha is expected to become our consolidated subsidiary in January next year. As previously announced, this means the integration will be achieved 2 years ahead of the original timeline. We believe that these three initiatives will generate new synergies and drive a major transformation in the group’s earnings structure.
In addition, on March 1st of this year, AEON Tohoku merged with AEON Supercenter, which had been operating Supercenter stores in the Tohoku region. This merger is part of our broader efforts to optimize regional operations and actively explore restructuring and M&A opportunities, leveraging scalability across different areas. While we continue to pursue business expansion, we've also begun to reorganize and streamline certain businesses within the group. Among our approximately 250 group companies, there are some businesses that have consistently posted losses. To improve overall management efficiency, we are reallocating the cash generated through restructuring efforts into growth areas such as digital transformation, health and wellness, and our operations in Vietnam, aiming to enhance the strategic quality of our portfolio. Led by Mr. Shikata, we are carefully reviewing each company, not only from a financial perspective, but also from the standpoint of its strategic value to the group.
We have already reached decisions on several entities. For cases where the impact on the group is significant, we will make timely disclosures as decisions are finalized. We are currently facing a wide range of societal challenges, including prolonged inflation outpacing wage growth, widening regional disparities, increasingly frequent and severe natural disasters, and growing risks of global economic fragmentation. While inbound tourism and the spending of some affluent segments may give the impression on average that the nation's overall affluence is being maintained, a closer look by demographic or region reveals a different story. In many areas, prosperity is rapidly declining, and we anticipate that this disparity will only deepen over the coming years. In fact, it may be fair to say that an increasing number of people are facing more difficult circumstances.
Against this backdrop, it is no longer sufficient to rely solely on the public sector to address these issues. Private companies must also take on an active role in helping to solve social challenges. The question we must now ask is whether the private sector can help build a society in which all people can enjoy a secure and fulfilling life and pass it on to future generations. We believe the time has come for businesses to engage more proactively in offering solutions and contributing to the resolution of nationwide challenges. As a company deeply rooted in local communities, we see it as our mission to serve as part of the social safety net and an essential part of daily life infrastructure. Giving back to the communities we serve must be a core part of our purpose.
Striking a balance between addressing social issues and pursuing sustainable growth as a business will be key to becoming an indispensable presence in every region and ultimately to achieving long-term sustainability in our management. It goes without saying that stable and reliable earnings form the foundation for this. While our current operating performance remains solid, we continue to face uncertainties. We will remain agile in responding to external changes while also pushing ahead with structural reforms aimed at securing long-term success. That concludes my remarks. Thank you.
My name is Egawa, and I'm responsible for finance and business management. Thank you very much for joining us today for AEON's financial results briefing for the first quarter of the fiscal year ending February 2026. First, let me provide an overview of our consolidated results for the first quarter.
Operating revenue was JPY 2,566.8 billion, representing 104.8% of the previous year's level and marking a record high for the fifth consecutive quarter. Operating profit was JPY 56.2 billion, up JPY 8.4 billion from the previous year, while ordinary profit rose JPY 2.6 billion - JPY 48.0 billion. Both figures mark record highs for the first time in two fiscal periods. On the other hand, net loss attributable to owners of the parent was JPY 6.5 billion, a year-on-year decline of JPY 9.9 billion. This was due to one-off factors such as extraordinary losses and temporary tax-related losses from group reorganization. AEON Financial Service, our group company, will hold its earnings presentation later today. The company has recognized losses related to our Vietnamese financial subsidiary, PTF, and has restated its full-year results for fiscal year 2024.
In AEON Group's consolidated financial statements, considering the size and materiality of the impact, these losses have been reflected in the first quarter results rather than in fiscal year 2024. This page shows the five-year trends of our key performance indicators. In the first quarter, although we recorded a net loss due to one-off factors, operating revenue and operating profit remained solid. Next, I would like to review our results by segment. Operating revenue exceeded the previous year's level across all reported segments. The GMS, Supermarket, Health & Wellness, and Shopping Center Development businesses made significant contributions to the expansion of operating profit. Let me now outline the segment results, starting with the GMS business. In the first quarter, the GMS business posted an operating loss of JPY 1.7 billion. While still in the red, this represented an improvement of JPY 1.6 billion compared to the same period last year.
Cooler temperatures in April and May put pressure on non-food categories, particularly apparel. In high sales ratio categories such as food, our strong price competitiveness supported steady growth in both customer traffic and overall sales. We are beginning to see the benefits of our digital investments, including the introduction of self-checkouts, electronic shelf labels, and labor-saving store fixtures, which are helping to offset rising labor and logistics costs. As a result, major subsidiaries achieved person-hour productivity of 106.6% year-on-year, while total labor hours were reduced to 97.1%, demonstrating tangible progress in improving productivity and optimizing store operations. AEON Retail remained in the red. It achieved an operating improvement of JPY 1.5 billion year-on-year, reflecting steady progress in structural reforms. I will provide more details on this later.
AEON Kyushu recorded a slight decline in profit, due in part to upfront investments in AEON Welcia Kyushu, but on a standalone basis, it achieved a modest increase in profit, driven by strong food sales. AEON Hokkaido and AEON Tohoku posted lower profits as they were unable to offset a decline in gross margin from weak non-food sales, combined with higher SG&A expenses. Can Do achieved both revenue and profit growth, driven by enhanced product assortments catering to travel and event demand, and the expansion of higher-value items with strong customer appeal. In the GMS business, we are making steady progress through a dual focus on profit structure reforms and pricing strategies. We recognize that revitalizing the non-food segment and further improving profitability will be critical to driving future growth. I would like to discuss AEON Retail.
For the quarter, we recorded an operating loss of JPY 1.7 billion. However, this represented a year-on-year improvement of JPY 1.5 billion and came in above expectations. Amid cost-push inflation, with consumers increasingly focused on protecting their household budgets, our efforts to emphasize value, particularly in food, along with the expanded sales of TOPVALU products and the enhanced procurement and assortment of key items such as rice, have proven effective. As a result, same-store sales rose to 102.7% of the previous year’s level. In particular, TOPVALU products supported both price competitiveness and margin improvement, helping lift the gross profit margin by 0.3 percentage points year-on-year. We also streamlined the GMS company organization at the start of the fiscal year, consolidating six divisions into four to enable quicker, frontline-focused decision-making and stronger sales execution.
Along with this, we have been reallocating head office and company staff to the stores, which has allowed us to keep a tight rein on expenses. Consequently, we have managed to limit the increase in SG&A to within the growth of gross profit, steadily advancing our cost structure reforms. On the operational side, initiatives such as optimizing staffing, modernizing checkout systems, and implementing various AI tools have driven labor productivity to 107.4% year-on-year, further promoting efficiency gains and the integration of DX. Next, I would like to discuss our supermarket business. In the first quarter, operating profit reached JPY 6.9 billion, marking a year-on-year increase of JPY 3.4 billion. Amid continued food price inflation, group companies worked to expand sales of TOPVALU products and strengthen price appeals and promotions on key-value items, KVI, the core products where customers are most sensitive to price.
These efforts have resulted in steady growth in both sales and customer traffic. In addition, strong sales of higher-margin private brand products, including TOPVALU and efforts to limit markdowns, contributed to improved gross margins. On the expense side, structural reforms and rigorous cost controls at each company have strengthened profitability, contributing to a significant increase in earnings. Among them, My Basket, which operates urban small-format stores, continued to drive the supermarket business as a whole, recording a JPY 0.9 billion increase in operating profit. Through active store openings and continual refinement of product assortments aligned with daily shopping needs, My Basket has maintained a high level of profitability. At Ministop, structural reforms delivered tangible results, with the company achieving a consolidated profit for the first time in 10 years since 2015.
In addition, USMH, in response to rising prices of national brand products, we implemented strategic measures tailored to the competitive environment, such as emphasizing price appeal on key-value items. Leveraging point-based promotions to increase shopping frequency, these initiatives are already showing positive results. We believe that advancing both stronger price competitiveness and initiatives to improve our profit structure in tandem has been the key driver behind the overall performance improvement of the supermarket business. Next, I would like to discuss our discount store business. Operating profit was JPY 1.8 billion, a slight decline of JPY 0.1 billion year-on-year. While operating profit showed a slight decline, same-store sales continued to grow at a solid pace of around 7%-8% year-on-year, indicating that the business foundation is steadily strengthening.
In terms of product strategy, we successfully captured bulk purchase demand in highly price-sensitive categories such as rice, processed foods, fresh vegetables, and alcoholic beverages, which contributed to sales growth. Sales of TOPVALU products also performed well, with overall TOPVALU sales in the discount store business rising by approximately 20% year-on-year. At AEON BiG, private brand products account for 26.3% of sales, demonstrating steady progress in the model that balances pricing competitiveness with profitability. At the store level, we introduced self-checkouts, streamlined operations, and reduced workload in ordering processes. In logistics, we have optimized delivery costs and adjusted receiving frequencies. These initiatives have resulted in a significant improvement in person-hour productivity. Next, let me move on to our health and wellness business. In the first quarter, operating profit reached JPY 8.4 billion, marking a significant year-on-year increase of JPY 3.1 billion.
At Welcia, both product sales and dispensing businesses performed strongly, with sales and profit exceeding our initial plans. In particular, the dispensing division maintained a high profit margin by securing various dispensing fees and minimizing the impact of drug price revisions. In the product sales division, self-service categories such as pollen allergy relief products, hair care, and basic skincare performed well, driving sales growth. In addition, strong sales of Welcia's private brand products, including TOPVALU, resulted in approximately 20% year-on-year sales growth, with their share against total sales exceeding 10%. These initiatives contributed to an overall gross profit margin improvement of 0.6 percentage points year-on-year. Meanwhile, to offset rising costs such as labor and electricity, we are enhancing store operations through digital investments, including upgrading our register applications and introducing business-use smartphones.
These efforts are steadily improving operational efficiency and driving progress in productivity enhancement. Our capital and business alliance with Tsuruha Holdings is also progressing smoothly. At the end of April, we obtained clearance from the Japan Fair Trade Commission under the Anti-Monopoly Act, moving preparations for the business integration into the next phase. Through this integration, we expect to generate synergies of approximately JPY 50 billion across the three companies, primarily in areas such as product development, logistics, training, and private brand development. To realize these benefits, we are advancing discussions among the companies as we work toward formulating the three-year medium-term management plan scheduled to begin in the fiscal year ending February 2027. Next, I'll cover our financial services business. In the first quarter, operating profit was JPY 13.4 billion, a decrease of JPY 1.5 billion year-on-year.
In our domestic business, the expansion of shopping revolving payments and installment plans led to an increase in operating receivables, supporting steady growth in card revenue. In addition, higher interest income from AEON Bank's securities portfolio contributed to overall revenue growth. On the other hand, higher deposit interest rates at AEON Bank increased financial expenses from rebalancing government bonds and other securities, as well as rising system operation and personnel costs outpaced revenue gains and resulted in lower profit. That said, we view these higher costs as strategic and sound investments into driving future earnings growth. In the Mekong region, despite the market being in an adjustment phase, tighter credit control has reduced bad debt-related expenses, resulting in a substantial profit increase. In the Malay region, revenue grew steadily on the back of expanding personal consumption.
Higher operating receivables, growth investments in the newly established digital bank, AEON Bank Malaysia, and increased costs associated with prudent credit management led to a decline in profit. That said, we view these investments as critical steps in building a solid foundation for future growth. Next, I will cover our shopping center development business. In this segment, operating profit reached JPY 17.1 billion, an increase of JPY 1.4 billion compared to the same period last year. AEON Mall, one of our core businesses, achieved record high operating revenue and profits at all levels for the first quarter. In Japan, proactive revitalization initiatives for existing malls, combined with customer traffic measures during the spring holiday season and series of national holidays in May proved effective. As a result, specialty store sales at existing malls rose to 104.7% of the previous year's level, driving both revenue and profit growth.
Overseas, while Indonesia recorded a slight decline in profit, China, Vietnam, and Cambodia all achieved profit growth, driving the international business segment to a record high operating profit. In particular, specialty store sales have remained strong in these countries, and the increase in percentage rent income has contributed to both higher revenue and profits. Additionally, in China, a reduction in operating expenses at existing malls helped drive a substantial profit increase. AEON Mall was delisted on June 27th, following its conversion into a wholly owned subsidiary through a share exchange with our company. Going forward, we will work closely with AEON Mall to promote growth initiatives as a life design developer, including the development of more attractive shopping centers. Next, I'll discuss the service and specialty store segment. Operating profit increased by JPY 0.8 billion year-on-year, reaching JPY 6.9 billion.
At AEON Delight, revenue grew steadily, supported by the expansion of maintenance services, including those related to the Osaka Kansai Expo and solid orders for energy-saving projects. In addition, initiatives to improve profitability, such as the digitalization of business operations, proved effective, resulting in double-digit year-on-year growth in operating profit. At AEON Fantasy, strong performance in the core prize business and the highly profitable card business drove domestic operating profit to a record high. Overseas in China, where improving profitability remains a key challenge, we implemented measures such as cost reductions, revitalization initiatives, and the closure of unprofitable stores. These efforts significantly reduced losses. As a result, consolidated operating profit for AEON Fantasy rose to approximately 2.5 x the level of the same period last year. At Cox, tied campaigns with well-known talents raised the proportion of full price sales.
Shifting production to the ASEAN region and streamlining suppliers to reduce procurement costs, we successfully improved the gross profit margin. Next, let me move on to our international business. In this segment, operating profit reached JPY 4.2 billion, up JPY 0.2 billion from the same period last year. While our operations in China faced challenges with both revenue and profit declining, solid profit growth in ASEAN, led by AEON Malaysia, supported overall earnings and enabled us to secure year-on-year profit growth. At AEON Malaysia, the start of Hari Raya, one of the country's major festive seasons, fell within this reporting period. Combined with effective promotional campaigns and event-driven initiatives, this drove higher customer traffic and strong growth in private brand sales, resulting in a double-digit increase in operating profit.
In Vietnam, the new AEON Xuan Thuy store, which opened in January, along with strong performance at existing stores, significantly boosted sales and led to higher profits. In China, with consumer sentiment remaining weak, performance declined, particularly in the Guangdong and South China areas, due to the growing shift toward frugality and delays in adapting our pricing strategy. We will work to regain momentum through stronger product development and enhanced sales promotions. AEON Hubei continued to expand steadily, supported by the strong growth potential of inland regions, and achieved higher profits. In Hong Kong, despite continued sluggishness in the retail market, driven by outbound consumption to the mainland and overseas, we improved profitability through the expansion of private brand sales and differentiation initiatives, significantly reducing losses. Let me update you on the recent developments. In June, there was one less Saturday compared to last year.
Even under these conditions, our group-wide initiatives, including bulk procurement and focused promotions of rice to attract customers, as well as increased demand for seasonal products driven by higher temperatures in the latter half of the month, delivered results. Sales landed largely in line with our expectations. Looking ahead to the second quarter and beyond, we will take full advantage of favorable consumption drivers such as the summer bonus season and the nine-day Obon holiday period with favorable calendar alignment. Through group-wide efforts to capture demand, we will work to maximize sales. Finally, let me touch on our outlook for the fiscal year ending February 2026. At this point, we are not making any changes to the full-year forecast announced at the beginning of the term.
In the first quarter, we have maintained the trend seen in the latter half of the previous fiscal year with steady results across our businesses, driven by securing operating profit and gross profit through pricing strategies, improving labor productivity via digital transformation, and strengthening cost controls. As a result, operating revenue, operating profit, and ordinary profit all exceeded last year's levels, with operating profit hitting a record high, bringing overall progress broadly in line with our expectations. From the second quarter onward, we will keep driving sustainable growth and profitability by advancing our profit structure reforms and price strategy in tandem, while addressing the challenges faced by each business promptly and steadily. In the first quarter, we recorded a net loss, mainly due to one-off tax expenses related to business reorganization and extraordinary losses associated with AEON Financial Service. However, both were temporary factors.
As I mentioned earlier, operating profit has been steadily improving since the second half of last fiscal year, and if this trend continues into the second half, net profit is expected to follow naturally. In addition, the full-year results will benefit from upside factors, including the profit contributions from the reorganization already completed, specifically making AEON Mall and AEON Delight wholly owned subsidiaries and making Tsuruha Holdings an equity method affiliate. Looking ahead, if Tsuruha becomes a consolidated subsidiary, there will also be an accounting impact on profits. However, as certain details are still being finalized, we will continue to monitor the situation and disclose updates as appropriate. That concludes my presentation on our results for the first quarter and the outlook for fiscal 2025. Thank you very much for your attention.
President Yoshida, I would like to ask about your strategy in Asia. While the company has long focused on the region, risk appears to be increasing recently. Circumstances and projects vary by country, but we've seen several risks materialize, such as the situation with PTF in Vietnam, as you mentioned in the presentation, the detention of employees in Myanmar, and most recently, the conflict between Cambodia and Thailand. How does management intend to address these risks? Will you continue to invest aggressively as before or take a more cautious approach depending on the situation? Please share your policy.
We view risk as a matter of information volume. Close collaboration with local governments is a critical factor in mitigating risks when expanding our business. While various challenges may arise, maintaining strong communication with government authorities enables us to receive proposals on potential developments and preemptive risk mitigation measures. Although our corporate headquarters is in Japan, it is essential to share information closely exchanged with local teams. ASEAN countries frequently hold investment seminars in Tokyo, and when opportunities arise to engage in dialogue with prime ministers and other officials, I actively participate. Our investment policy remains unchanged. We intend to continue allocating significant resources to asset investments in Vietnam. The Vietnamese economy is showing signs of improvement, and we are strengthening our local workforce.
Preparations for various projects, including supermarkets, general merchandise stores, and AEON Malls, are progressing well, such as preliminary land agreements. As I have stated previously, our goal is to develop Vietnam into a second Japan. With a population exceeding 100 million, ongoing economic growth, a young average age, and a continuing demographic dividend, we remain committed to our focus on Vietnam.
I would like to revisit the comparison between budget expectations and actual performance by segment. Egawa mentioned that AEON Retail performed above expectations, but could you elaborate on the differences in performance across each segment?
I understand your question as seeking a comparison between segments against budget expectations rather than focusing on financial figures alone. Segments that performed well include health and wellness, shopping center development, and general merchandise store. As mentioned earlier, health and wellness saw a strong performance in both product sales and dispensing sales, significantly exceeding the plan. The shopping center development business also performed well, with AEON Mall achieving record-high profits, resulting in a substantial positive variance against budget. Although the GMS business posted an operating loss, it improved by JPY 1.6 billion year on year. We believe that strengthening price appeal in the food category contributed to increased customer traffic.
Overall, operating profit was in line with expectations, and no segment significantly underperformed relative to budget this time.
Reflecting on the challenges you raised when you first assumed the role of president, I recall your question: What kind of company is AEON? At that time, the main profit drivers across the consolidated group were the financial services and shopping center development business, while the retail business was not necessarily generating strong earnings, a concern you clearly recognized. Since then, you have undertaken structural reforms over a considerable period, and in the past year, we've seen concrete progress in portfolio realignment. With that in mind, I'd like to ask, do you consider the financial services business to be a core part of AEON, or is it positioned primarily as a complement to the retail business? Also, within the retail segment, AEON operates various formats: GMS, discount store, and supermarket, et cetera.
The retail business has been a core challenge since I assumed the role of president. Historically, profits generated by the shopping center development, health and wellness, and financial services business were offset by losses in the retail business, resulting in consistently low operating margins. As I mentioned at the beginning, the retail business remains a key area for improvement. The most critical factor in improving the retail business is merchandise. When I took office, sales of TOPVALU were around JPY 700 billion. Today, they exceed JPY 1 trillion. Reforming our product strategy has been essential to driving top-line growth, and this approach has proven effective. Customers now perceive little difference between our private brands and national brands, and we successfully captured the market trend where consumers are increasingly comfortable purchasing private brand products.
Young talent has taken the lead in product planning, resulting in the development of value-driven products that customers are willing to purchase, even at higher margins, which has contributed to profit growth. When I took office, we had no self-checkout machines, but through the diligent implementation of DX initiatives at the store level, we tightened cost controls and improved efficiency. This correlation has led to the profit improvements we are seeing today, and we must continue to evolve this model further. As for your question about whether the financial services business is our core business or not, in our multi-format structure, it acts as a critical foundation that connects our various business formats. With the growing prevalence of cashless payments, failing to own the payment infrastructure leads to profit leakage outside the group. That's why having our own payment capabilities is so important.
For example, in the supermarket business, even with a 4% operating margin, franchise fees typically account for around 2%. In the past, 80% of transactions were cash and 20% cashless. Now that ratio has reversed. If we can retain payment functions in-house, we can reinvest the cash flow into promotions, for example. In today's and tomorrow's DX-driven environment, the financial services business is a vital element in building our ecosystem. Given Japan's demographic trends, some argue that small format stores serving local communities will become increasingly important compared to big shopping malls and GMS that target broader areas. At the same time, rising costs are a concern.
Looking ahead, if you were to prioritize within the retail business, which formats or areas should AEON focus on?
Regarding the discussion on trade areas, I fully agree that the importance of neighborhood shopping centers is increasing, as we've seen in the U.S. As I mentioned earlier, as disparities between urban and regional areas widen, neighborhood shopping centers are playing a more significant role in regional cities. AEON Town has developed several neighborhood shopping centers, but many of them require substantial remodeling. The key question is how much these centers can take on not just retail functions, but also services and broader social roles. I believe neighborhood shopping centers have the potential to contribute to solving social issues, as I mentioned at the outset. Clinics, for example, are difficult to operate as standalone facilities, but if a neighborhood shopping center can host three to four medical departments, it becomes a viable business for hospitals leveraging the shopping center's foot traffic.
For local residents, it also creates a convenient environment where they can receive health maintenance services while shopping. Another important aspect is the bus network. These services are gradually disappearing due to population decline. If we can integrate social functions into regional shopping centers and connect them to residential areas via bus routes, we can establish a sustainable living zone. Previously, people had to transfer between multiple buses to reach dispersed facilities. If everything is consolidated and connected by a single route, it becomes more efficient to operate the bus system. Looking ahead, I believe formats that fall somewhere between neighborhood shopping centers and regional shopping centers, what we refer to as community shopping centers, will become increasingly important.
Regional shopping centers offer sufficient parking and facility scale, and by incorporating elements of entertainment and wellness, not just essential services, but enjoyable experiences, we see an opportunity to contribute meaningfully to addressing social challenges.
Regarding the losses related to Vietnam, could you clarify what specific items were recorded as extraordinary losses in the consolidated results and to what extent they impacted the financials?
This is Egawa. Details regarding the situation with PTF in Vietnam will be explained by AEON Financial Service shortly. In the fiscal year ended February 2025, AEON Financial Service reported a goodwill impairment of JPY 3.8 billion related to this matter. As for the impact on AEON's consolidated financials, although AEON Financial Service incorporated the loss in its previous fiscal year results, AEON decided to reflect the impact in the first quarter of the fiscal year ending February 2026, considering the materiality of the amount.
We recorded this extraordinary loss, and based on our approximately 50% ownership stake in AEON Financial Service, it resulted in a net impact of approximately JPY 1.8 billion, lowering our earnings accordingly.
President Yoshida, in light of the recent misconduct at a subsidiary, could you share what lessons have been learned and what measures are being taken to prevent similar issues in the future?
This is fundamentally a matter of governance at the holding company level. AEON entered the Vietnamese market a little over 10 years ago, and in hindsight, we may have been too optimistic. Over time, a sense of complacency may have developed. It is essential to fully understand the local systems, conditions, regulations, and unique business practices, especially in finance business. From contract signing to handover, the process took over a year, during which various elements deteriorated or changed, including rules, COVID-related measures, and employment practices.
If we had responded more sensitively and provided continuous care throughout, the outcome might have been different. Another key lesson is that overseas operations are often left entirely to the local president. It is crucial to regularly align the level of information and understanding between the local leadership and the holding company. Ensuring consistent communication and oversight is essential to maintaining governance standards across borders.
Three months ago, I asked a similar question to President Yoshida regarding your efforts to reform the retail business. At the time, I felt that synergies within the retail segment were beginning to emerge. Looking at the first quarter results, it now appears that the shopping center development, services and specialty store business, and the various multi-format companies are organically connected and also aligned with consumer behavior. I would like to ask how you perceive the current progress. While I imagine you may say that the transformation is still underway, could you share your thoughts on how you plan to further strengthen and leverage this momentum going forward?
Retail performance has been improving, and while the shopping center development business had been slower to recover from the impact of COVID-19, it has now returned at a level where it can deliver record profits. With the retail business recovering and regaining its previous earning power, the overall portfolio balance is becoming more stable. However, considering the current environment and inflationary pressures, I believe the retail business must take a more proactive approach to pricing. As I mentioned earlier, the wallet share of food continues to expand, and the Engel's coefficient remains high. We must find ways to return value to consumers through our products.
From the perspective of the shopping center development business, the portion of consumer spending that would ideally go toward hobbies or entertainment is being squeezed by food expenses. AEON Mall can play a role here by offering experiences that don't require spending, providing enjoyment without financial burden. Health is another key area, especially with aging demographics and growing interest in wellness. Through partnerships with Tsuruha and Welcia, we aim to elevate the level of our health and wellness offerings. We believe it is essential to integrate one-stop shopping capabilities within our drugstores. Looking ahead, we must further evolve our retail, shopping center development, and health and wellness businesses, not just by one step, but by two or more, to remain resilient in the face of inflation and future challenges.
Regarding the My Basket and Discount Store business, I have two questions. First, My Basket has been a key driver of the supermarket business. How much has its sales grown recently? Also, toward the 2,500 store vision, how many new stores are planned for this fiscal year? Second, in your earlier explanation, Egawa-san mentioned the importance of clarifying growth drivers for the discount store business. Would that include private brands, rice, and alcoholic beverages? What do you consider to be the main growth drivers for the discount store business?
Egawa here, and I'll answer your question. My Basket continues to lead the supermarket segment with strong performance. Sales in the first quarter grew to 115.7% year-on-year, indicating significant momentum. Toward our goal of reaching 2,500 stores, we plan to open approximately 150 stores this fiscal year.
This is [inaudible]. As you mentioned, we intend to strategically expand the discount store business. As President Yoshida emphasized earlier, product-centric reform is equally critical in the discount store business. One of the major growth drivers is the development of discount store exclusive category brands, which are distinct from TOPVALU. These include large volume products and items with simplified packaging to reduce costs. As a result of introducing these products, Big-A has achieved double-digit growth. We are committed to robust product development, aiming not just for low prices, but for offerings that are unique to AEON. Products that customers can only find in our discount stores.